In a coverage dispute between two insurers, the federal district court found the professional services exclusion under one of the insurer’s policies did not apply. The Phoenix Ins. Co. v. Scottsdale Ins. Co., 2026 U.S. Dist. LEXIS 192870 (E.D. N. Y. Aug. 25, 2026).
GGP Staten Island Mall, LLC contracted with Aurora Contractors, Inc. to serve as general contractor for constructing a mall. Aurora contracted with ADCO Electrical Corp. to furnish and install a complete power distribution system. A busway duct on the mall’s roof exploded, causing damage to nearby ducts and other GGP property, also leaving the mall without power.
GGP sued Aurora for breach of contract. Aurora filed a third-party complaint against ADCO, alleging that ADCO was responsible for the damage caused by the defective duct. ADCO filed a counterclaim against Aurora for breach of contract.
Travelers insured Aurora under a CGL policy. The policy stated its coverage was only in excess over “any other insurance, whether primary, excess, contingent or on any other basis.
Scottsdale issued ADCO a CGL policy which provided an additional insured included any organization “for whom you are performing operations when you and such . . . organization have agreed in writing . . . that such . . . organization be added as an additional insured on your policy . . .” .Such organization was “an additional insured only with respect to liability for . . . ‘property damage’ . . . caused, in whole or in part by . . . your acts or omissions . . .” Finally, the policy read that it was “primary to and will not seek contribution from any other insurance available to an additional insured” provided that the parties “agreed in writing in a contract or agreement that this insurance would be primary and would not seek contribution from any other insurance available.”
In the subcontract agreement between Aurora and ADCO, ADCO was to secure a policy naming Aurora as an additional insured which was “primary and non-contributory insurance before any other insurance . . .”
Travelers filed suit seeking a declaration that Scottsdale was required to defend and indemnify Aurora in the underlying action based upon the subcontract and Scottsdale’s policy issued to ADCO. Travelers sought reimbursement for costs incurred to defend Aurora in the underlying action and a declaration that the Travelers policy issued to Aurora was excess to the Scottsdale policy. Cross motions for summary judgment were filed.
Scottsdale first argued there was no “occurrence” because the underlying claims were based in contract law and only alleged damage to Aurora’s own work. The court found, however, that because the duct explosion was alleged to have damaged property other than Aurora’s own property, it was an “occurrence” causing “property damage” under the policy, meaning Scottsdale had a duty to defend Aurora in the underlying action.
Scottsdale next relied on the professional services exclusion in its policy. The exclusion precluded coverage for occurrences arising from “rendering of or failure to render any professional services” including “engineering, architectural, or surveying services” and the “supervision, hiring, employment, training or monitoring of others” involved in the engaged services.
Under New York law, whether the professional service at issue involved special acumen and training was key rather than the normal powers of supervision and observation. Several allegations in the underlying action left open the possibility that Aurora could be found liable for conduct beyond the scope of “professional services.” For example, Aurora could be held liable for its failure to ensure its subcontractors remained in compliance with relevant safety laws and standards. Such obligations arose not from Aurora’s engineering acumen but rather from its normal powers of supervision and observation as a general contractor.
Because the underlying complaint contained claims that arguably arose from something other than a failure to render professional services, Scottsdale had a duty to defend Aurora in the underlying action. Therefore, Scottsdale’s policy was primary, and Travelers was entitled to reimbursement of costs it expended in defending Aurora.